Want to buy but being scared by negative equity comments!!

Money_Saving_Mandy_2

Hey all

Wondering if you could give me your comments...

I want to buy a 2 bed house and sell my shared ownership apartment (since it costs me the same in mortgage, rent and service charge as I could get a whole mortgage for).

Ive been watching a fair few houses for a while now and would put in offer of 20% less than asking price.

But by porting my 50% mortgage and getting some more on top to buy a house I would use some of my equity to pay for solicitor fees / estate agents fees (if needed as the housing association tries to nominate someone from their waiting list first) - so I would only be putting about 5% down as a deposit on the entire house (10% of the new bit of mortgage I need).

BUT my sister starts saying you'll end up in negative equity etc etc etc. However surely if I buy a house valued at say £120k for 15% less than asking price and have 5% equity in it then if house prices fall it would be from the original £120k not what I paid for it.

PLUS I plan to staying in this house for like 4 years or so, so surely any crisis (and if I did end up in negative equity) would of smoothed out by then.

The house I want needs a far bit of DIY, so Im hoping to get a knock down price and do bits like new windows and boiler etc - would this not help to add value?

SORRY for a long post!!!!!

Any comment, good or bad most apppreciated.
Mandy

Money_Saving_Mandy_2

Also forgot to say I have no debts, so Im not in as bad a situation as some out there comtemplating buying etc.

pickles110564

Who is going to buy your apartment to start with and at what price?

Jimuth

20% is a lot below asking price. How do you know you could get it at that?

Who knows what the prices will be in 4 years, or indeed what state the world will be in?

I think the question you should be asking yourself more than negative equity is... I'm getting a new mortgage, can I afford it if I lose my job? Can I afford it if interest rates go up to 10% or similar?

Is this the house I really want, or should I hang on for another 6/12 months to see what happens?

Fixing up a house will naturally improve its value, but if the house is deficient at the moment, you'll only be spending money to get it back to how it should be. In a more competitive market, houses which don't tick all basic boxes will always be at the back of a buyer's wanted list. If it needs the work doing to make you comfortable there in your time living there, then that's a price only you can decide is worth paying.

If you won't want to move from there for years, then don't worry about neg equity. However, life changes quickly. How do you know you WON'T want to move there for 4-5 years?

Think I'm recommending caution! The market is pretty much dead at the moment. If it's the house you want, then it's a heart over head answer. If you wait, and watch, then you may see you can get better for less by the end of the year.

Regardless, if you're sure your next place will be yours for years, and you don't mind potentially paying over the odds, then negative equity should be less of a worry than paying the mortgage when the country is heading into a recession.

jaype

Slight flaw... you're going to sell your flat for asking price then put in a 20% BMV bid for the place you are buying. What makes you think you'll be able to sell for as much as you think, therefore? If I were you and wanted to move I'd concentrate on getting rid of the flat first and only then think about buying elsewhere. Most sellers and EAs now know that the market is knackered and don't really take offers seriously unless the buyer is proceedable immediately (based on my landlady's attempts to sell - three offers but they all had as yet to put their home on the market. EA told them all to come back later when they had a buyer themselves. Who wants to be stuck in a chain that could last a year?)

Snooze

Money_Saving_Mandy wrote: »

Hey all

Wondering if you could give me your comments...

I want to buy a 2 bed house and sell my shared ownership apartment (since it costs me the same in mortgage, rent and service charge as I could get a whole mortgage for).

Ive been watching a fair few houses for a while now and would put in offer of 20% less than asking price.

But by porting my 50% mortgage and getting some more on top to buy a house I would use some of my equity to pay for solicitor fees / estate agents fees (if needed as the housing association tries to nominate someone from their waiting list first) - so I would only be putting about 5% down as a deposit on the entire house (10% of the new bit of mortgage I need).

BUT my sister starts saying you'll end up in negative equity etc etc etc. However surely if I buy a house valued at say £120k for 15% less than asking price and have 5% equity in it then if house prices fall it would be from the original £120k not what I paid for it.

PLUS I plan to staying in this house for like 4 years or so, so surely any crisis (and if I did end up in negative equity) would of smoothed out by then.

The house I want needs a far bit of DIY, so Im hoping to get a knock down price and do bits like new windows and boiler etc - would this not help to add value?

SORRY for a long post!!!!!

Any comment, good or bad most apppreciated.
Mandy

I'll tell you right now that you've no chance of selling a shared ownership place for more than £2.50 in the current market, and even then any prospective buyer will still haggle for a reduction. And yes, I did say £2.50.

Rob

RoxieW

Funny that - our housing !!! has a waiting list of 3000 people for a shared ownership property.
We briefly had our property on the market in April (but the house we wanted to buy fell through) and had two offers at asking price.
So there are shared ownership buyers out there. Even if prices go down 20 - 30% there'll still be many many people who cant afford the full prices and will consider a shared ownership property.

beecher

I think you need to concentrate on selling first, and then working out your options are as it is impossible to second guess how long it will take to sell, and how much you will get.

Also, porting your mortgage and adding a bit is not automatic - are you sure your mortage provider would agree to this? Maybe worth speaking to them if you haven't already done so.

tradetime

PLUS I plan to staying in this house for like 4 years or so, so surely any crisis (and if I did end up in negative equity) would of smoothed out by then.

I won't get involved in the will you get what you want with regards to sale and purchase prices. I'd say the above ststement is the real flaw in your thinking, to buy a property with the view of only staying in it for 4 years ish represents a speculative trade in the property market, and would imho be a poor decision in the current climate. But you must do as you see fit, your life and your money.
There's an old trader saying that goes "I'd rather be out of a trade, wishing I was in, than in a trade wishing I was out."

pickles110564

tradetime wrote: »

to buy a property with the view of only staying in it for 4 years ish represents a speculative trade in the property market, and would imho be a poor decision in the current climate. But you must do as you see fit, your life and your money.

How do you know that the OP is about to get in the renovation business, if you buy at right price you will be able to get out at the right price.

tradetime

pickles110564 wrote: »

How do you know that the OP is about to get in the renovation business

Firstly, I can't really see the bit in my post that says the OP plans to get into renovation. Perhaps you could help us out and quote that bit?......No? ..Thought not.
The OP plans to sell one property, with the associated costs of doing so, buy another, again with the associated costs.

plan to staying in this house for like 4 years or so

at the beginning of a correction in the market, gamble that whatever discount she can negotiate now will cover any fall, or expect said correction not only to have completed but also recovered to some degree to offset a bigger fall than her discount.

, if you buy at right price you will be able to get out at the right price.

Stunning deduction Sherlock, unfortunately "the right price" is a relative term, for the comment to have any significant meaning "the right price" in 4 years or so would have to be higher than the "right price" today. Thus if she buys it for the "right price" today, and the "right price" 4 years or so is 30% lower, the fact that she got the "right price" will be of little consolation